Scottish Mortgage’s £1.31bn Buyback Campaign Reshapes Risk Map as Cyber Threats and AI Uncertainty Emerge

Scottish Mortgage Investment Trust reports buyback program erases discount, pushes shares to a 7% premium. Board consolidates risk categories, flags rising threats from AI and cyber attacks.

The board of Scottish Mortgage Investment Trust has used its annual report to signal a fundamental shift in how it governs the vehicle, consolidating risk categories while acknowledging fresh threats from cyber attacks and artificial intelligence. The document, covering the year to 31 March 2026, also reveals a buyback programme that has all but extinguished the long-standing discount to net asset value and even pushed the shares into premium territory.

From double-digit discount to premium pricing

During the fiscal year the trust repurchased 122.9 million of its own shares at a cost of £1.31 billion. That buying spree was part of a broader two-year campaign that has seen a total of roughly 307.7 million shares – equivalent to about 22% of the then outstanding capital – removed from the market at a combined outlay of £3.02 billion. The impact on the valuation gap has been stark. The average discount to NAV narrowed from 9.7% to 9.6% over the year, though it actually widened from 9.0% to 9.5% at the reporting date. Crucially, in the weeks after the balance-sheet date, the shares flipped to a premium, and the fund now trades at roughly 7% above net asset value.

That premium allowed the board to take an unusual step. On 1 June, Scottish Mortgage issued 2.35 million shares from its treasury at 1,516.50 pence – a price above NAV. After the transaction, around 1.115 billion shares remain in circulation and 369.5 million stay in the treasury. Most comparable vehicles in the sector still trade at a discount, so this issuance underscores the unusual demand for a portfolio heavily weighted toward private markets.

Risk reclassification and new pressures

The board has overhauled its risk disclosures, consolidating multiple categories into fewer, more clearly defined fields. The rationale is that macroeconomic, geopolitical and regulatory factors now amplify each other rather than operating in isolation. From the start of the next fiscal year in April 2026, stricter internal control and risk-reporting standards will apply, and the trust is preparing for that tighter regime.

Financial risk in aggregate remains rated as high but stable. The biggest relief comes from the discount risk, which the board now labels “sinking and moderate” – a clear upgrade. Cyber security, by contrast, has been identified as a new moderate risk. The board notes that attacks are growing more sophisticated, partly because adversaries are themselves deploying new technologies. Cyber risk is rated as both moderate and rising.

Artificial intelligence is singled out as a double-edged sword. Rapid technological advances in AI create significant opportunities across the portfolio but also inject uncertainty, with the potential for disrupted business models, capital allocation upheavals and periods of market dislocation.

Gearing, liquidity and the SpaceX factor

Scottish Mortgage’s leverage has come down to 11% from 13%, and all maturing credit facilities have been refinanced successfully. An additional $70 million in unused revolving credit lines provides extra financial flexibility for future investments in private and technology-focused companies. The board acknowledges that private-market holdings increase liquidity risk because those positions are harder to trade and rely on subjective valuations.

SpaceX remains the portfolio’s single biggest bet at 17.9% of assets, a concentration that has drawn analyst warnings about overheating in private markets. Those concerns have done little to dampen investor enthusiasm, however. The trust has been the most popular choice among retail investors for three consecutive months through May 2026, outpacing rival funds such as Polar Capital Technology and Allianz Technology Trust.

Stock performance and what comes next

The shares have climbed roughly 31% since the start of the year, reaching €18.20 – just 0.44% higher on the day of the report’s release. The 52-week low, set in November 2025, is more than 50% below the current level, while the year’s high on 25 May is about 4% away. The stock trades comfortably above its 50-day moving average.

Investors will now watch for the quarterly numbers to 30 June, which should provide an updated picture of how heavily the trust continues to lean on its SpaceX position and whether the new risk framework is beginning to influence portfolio construction. The real test will come when the tightened control obligations take full effect in the new fiscal year starting April 2026.